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Shares of Evergrande EV unit surge 50% after raising $3.4 billion

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evergrande EV electric vehicles cars new energy NEV EV

Shares of the electric vehicle unit of Chinese property giant Evergrande surged nearly 50% on Monday after announcing that it had raised $3.35 billion from six investors in an add-on share sale to support its plan to become “the world’s largest EV maker.”

Why it matters: The sale, one of the biggest for a listed electric vehicle maker, are part of a broader trend in global stock markets as investors make big bets on EV players thought to be the next Tesla.

  • Chinese EV maker NIO recently raised more than $3 billion in its recent upsized follow-on offering which closed in mid-December. Meanwhile, Xpeng Motors and Li Auto secured war chests of around $2.5 billion and $1.5 billion, respectively, with their new stock offerings early last month.

Details: China Evergrande New Energy Vehicle Group closed the sale of 952 million shares at HK$27.3 each, representing a discount of 8.7% to Friday’s closing price of HK$29.9, for a total of HK$26.0 billion (around $3.35 billion), according to a statement released Sunday.

  • The add-on offering raised HK$5 billion each from four private investors, including Cosmic Success Holdings and Upper World Limited, subsidiaries of Chinese real estate developers Kingkey Group and Zhongzhou Group, respectively.
  • Investors also included Chan Hoi-wan, practical controller of Chinese Estates Holdings and wife of Hong Kong billionaire Lau Luen-hung, as well as Liu Minghui, founder of Hong Kong-listed China Gas Holdings. Chan and Liu each purchased shares worth HK$3 billion.
  • All of the investors have close ties with Evergrande, which is the EV unit’s biggest shareholder. Some had invested in Evergrande’s property management arm which went public in Hong Kong in December.
  • The company’s stock price jumped 48% to HK$44.5 by Monday afternoon, expanding its market capitalization beyond $50.6 billion, easily eclipsing some of China’s biggest automakers such as SAIC and Geely.
  • The company plans to put the funds toward research and development, debt repayment, and production, according to the statement.

Context: Evergrande’s EV subsidiary said it will start mass production of its electric car portfolio of six models ranging from sedans to crossovers in its Shanghai and Guangzhou facilities by September. It has said that it expects its core business to reach profitability in 2022.

  • However, the would-be EV maker has yet to start trial production, according to a Caixin report (in Chinese) last month. The company has also faced ongoing criticism for grabbing land under the guise of making cars, according to a Financial Times report.
  • The company raised in September $516 million in fresh funding from Chinese tech giant Tencent and ride-hailing unicorn Didi Chuxing, among others, and revealed plans for a secondary listing on Shanghai’s Nasdaq-style STAR Market tech board.

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